RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of May 1st, 2020

Posted by RIA in a Box

May 8, 2020 3:38:42 PM

Top_Compliance_Articles_of_the_week-17Each week we’re giving you our weekly report highlighting the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to registered investment adviser ("RIA") compliance and regulatory issues. This week's recap focuses on the Securities and Exchange Commission's ("SEC") recent guidance on Paycheck Protection Program ("PPP") loans, Regulation Best Interest ("Reg BI") implementation deadline, and the Financial Industry Regulatory Authority's ("FINRA") and the North American Securities Administrators Association's ("NASAA") online test-taking service. 

Here's our top investment adviser compliance articles for the week of May 1st, 2020:

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1. Even with SEC guidance, advisers must decide when to disclose PPP loans (Author - Mark Schoeff Jr., InvestmentNews) 

The SEC released guidance earlier this week on loans received from the Paycheck Protection Program administered by the Small Business Association. According to Mark Schoeff Jr., “An RIA should disclose the loan if it has a material effect on the firm’s relationship with clients.” The guidance further clarifies ADV disclosures and provides examples of scenarios in which disclosures for loans must be made. Compliance experts weigh in on the SEC’s guidance suggest that advisors should be cautious when taking the PPP loan. “Advisers should err on the side of disclosure,” said Chris DiTata, vice president and general counsel at RIA in a Box, a compliance software and consulting firm. “The SEC has made clear it is a thin line to walk.”

2. Clayton Holds Firm On June 30 As Reg BI Implementation (Author - Tracey Longo, Financial Advisor Magazine)

Despite disruptions caused by COVID-19, the SEC is maintaining its June 30th deadline for implementing its Regulation Best Interest rule, including the Form CRS requirement. As quoted by Tracey Longo, SEC Chairman Jay Clayton stated, “Based on that engagement—and because the continued implementation of these conduct and transparency initiatives … will significantly benefit Main Street investors—we believe that the June 30, 2020, compliance date for Reg BI and other requirements, including the requirement to file and begin delivering Form CRS, remains appropriate.” Clayton emphasizes that SEC staff continues to work remotely and is continuing to examine firms.

         3. SEC Forms COVID-19 Task Force, Issues More Regulatory Relief (Author - Melanie Waddell, ThinkAdvisor)

The SEC has formed a COVID-19 Market Monitoring Group and has passed orders to provide additional regulatory relief. According to Melanie Waddell, “The temporary, senior-level COVID-19 Market Monitoring Group will help the commission and its various divisions and offices in actions and analysis related to the effects of COVID-19 on markets, issuers, and investors, and will respond to requests for information, analysis and assistance from fellow regulators and other public-sector partners.” Additionally, the SEC issues two exemptive orders to move Consolidated Audit Trail (CAT) to set up a phased CAT reporting timeline for broker-dealers and has also voted to propose a new rule around modernizing fund valuations.

         4. Advocates Say PPP Disclosure May Put RIAs at a Disadvantage (Author- Patrick Donachie, WealthManagement)

Earlier this week, the SEC released guidance on disclosure if a firm accepts a PPP loan. This guidance clarified that RIA firms who accept a PPP loan must disclose this on their ADV. Broker-dealers, however, who are regulated by the Financial Industry Regulatory Authority (“FINRA”), are not required to disclose acceptance of a PPP loan. This disparity in regulation is leading many to argue that this is a disadvantage to RIA firms. According to Patrick Donachie, “Dan Bernstein, the chief regulatory counsel at MarketCounsel, said the critique is similar to those raised against the commission’s Regulation Best Interest rule; while it purports to strengthen scrutiny and regulation on broker/dealers around the country, Bernstein and other advisor advocates argued that it puts SEC-regulated financial advisors at a disadvantage.”

           5. Registration Starts May 11 for FINRA, NASAA, Online Test Taking (Author - Melanie Waddell, ThinkAdvisor)

“Starting on May 11, broker-dealers and their registered reps can schedule their online test-taking appointments for exams that will begin on May 24 as part of the Financial Industry Regulatory Authority and the North American Securities Administrators Association’s online testing service, which is to be administered remotely by Prometric,” according to Melanie Waddell. This online testing service will allow test-takers to use its computers equipped with video capabilities to complete exams. In addition, FINRA along with the SEC has proposed a rule to deliver certain documents to be delivered via email and plans to finalize testing requirements in conjunction with other regulators.

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Don't forget to check out last week's top RIA compliance news articles focuses on the recent release of the North American Securities Administrators Association's ("NASAA") annual report, a rise in cybersecurity deficiencies, and the SEC guidance for advisors on disclosing PPP loans on their Form ADV. 

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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